So you’ve decided to purchase a new car and realized you need insurance to complete the transaction.
There are a few things to consider when purchasing an insurance policy for your new ride before you drive it off the lot.
First off, do you already have an auto insurance policy?
Second, are you paying cash or financing the vehicle through a lender, such as a bank, credit union or perhaps a leasing company?
If you already have a policy the process can be pretty simple, but there are two important issues regarding insurance coverage for a new car.
Replacing or Adding a Vehicle?
The first is whether you are simply replacing your current vehicle with a new one (including leased vehicles) or adding an additional vehicle to your policy.
If you’re simply replacing an older car with a new replacement vehicle, you should be automatically covered for a certain amount of time, perhaps a week or two, and the coverage should be the same as what you had on the old car.
While new car insurance grace periods may differ by state or insurer, you may have between 7-14 days or more to notify the insurer of the change.
The insurer acts on the assumption that you didn’t trade in a Yugo for a Lamborghini, so they’re comfortable giving you some time to notify them about it.
Of course, it’s better to notify them sooner rather than later to avoid any potential issues.
If your new car is an additional vehicle to the one (or more) already listed on your insurance policy, you are typically automatically covered for slightly less time than you would be if it were a replacement vehicle (if at all).
Of course, your insurance company will want to know about the additional vehicle(s) because it means they’ll have more exposure to potentially paying insurance claims and will most likely increase your insurance premium.
Know How You’re Automatically Covered
The second issue pertains to the difference between liability and physical damage coverage.
Liability is automatically covered on a new vehicle in the situation discussed above.
Physical damage coverage, on the other hand, has some limitations.
If you don’t already have physical damage coverage (perhaps you had an older car you didn’t mind getting banged up), your vehicle may be covered automatically for a few days.
If you already have physical damage coverage, your vehicle will likely be covered equal to the highest amount of coverage on your current policy.
Check with your insurance agent or insurer to verify the amount of coverage before driving off the lot.
There will be an automatic deductible assigned to the policy if this is the case.
As always, be sure to gather online insurance quotes to make sure you’re getting the best coverage at the lowest possible rate for your new vehicle.
Tip: It is highly recommended that you contact your insurance agent or insurer prior to purchasing a new vehicle.
Every insurer and state has different rules regarding what they find acceptable. You certainly don’t want to end up uninsured…even for 10 minutes, or even 10 seconds!